5 simple steps to good financial health

Is your money working hard enough for you? It takes a little thought – but it’s well worth the effort.

Do you know your exact financial picture? Do you know how much you spend in an average week, and how much superannuation you have? Have you got a will – and is it up to date?

When it comes to having a clear understanding of our financial situation, many of us could do better, says Helen Baker, author of personal financial guide On Your Own Two Feet.

She says women in particular should take a proactive interest in their short and long-term financial security and recommends focusing on five key steps.

Have an emergency fund

This isn’t your credit card.

“COVID-19 has helped people realise that they need a backup plan in case they lose a job or get sick – and that should be at least three months of spending commitments and mortgage payments tucked away,” says Helen.

“Set and forget with a direct debit amount from another account and lock the money in a high interest savings account or a term deposit that you can’t easily access.”

Create a spending and investment plan

Spending money is OK but work out how much you spend each week or month.

Include essentials like utility bills, mortgage and car payments, groceries and school fees and the nice-to-haves like getting your hair and nails done.

“Choose what is important and what you can shave off,” says Helen.

Once you know how much money is available, create “pots” of money for fixed expenses, discretionary spending, holidays and savings.

The Moneysmart budget planner can help fine tune your figures.

Check you are adequately covered by insurance

Think about insurance for your personal and financial health.

That includes private health insurance, general insurance (home, contents, car, jewellery, landlord and business), and personal insurance (life, total and permanent disability, income protection and trauma).

“Most people are under-insured – they’ll insure their car for $30K or $40k but don’t protect their income, for example,” says Helen.

Understand your superannuation

Your super is possibly the biggest asset you hold in your lifetime, so know how your money is invested.

“Superannuation is one of the most tax-effective ways to build your investments in the future.

Understand who your beneficiaries are and how much each person would get in the event of your death,” says Helen.

“Get on the front foot and make sure your super is doing good things for you.”

Make a will

Think about organising an executor, powers of attorney, guardianship for your children, a letter of wishes and an advanced health directive – instructions in case you can’t speak for yourself.

Also set up your will so your estate isn’t totally swallowed in taxes and update it if your relationship or family circumstances change.

“A DIY will kit isn’t the best idea,” says Helen. “Talking about death is not nice but the consequences of not having a will can leave a mess.”

Written by Sarah Marinos.